Factor Analysis of Iraqi Dinar Revaluation

The currency of any country is the life blood for the development of that state. If the value of currency is high, then the purchasing power of the inhabitants will be strong as well as the county will be consider as a developed state. On the other hand, in case of weak currency, the economy can never be developed easily. But interesting thing is that the Foreign Exchange rate or the value of currency is fully tied up with the economic, political, social and demographic conditions prevailing in that country.

Iraqi Dinar

This general rule is also applicable in case of Iraqi Dinar .As we all know it very well that Iraqi Dinar has been drastically devalued in last few decades. The reason for this demolishing fall is numerously different. As per the current situation in Foreign Exchange there are daily basis fluctuations in the Exchange rate of Iraqi Dinar against US Dollars.

According to analyzers, the value of Iraqi dinar is 1,168.25 = US$1. Some of them forecasted that Iraqi Dinar is expected to trade at 1193.00 by the end of this quarter, as per the Trading Economics global macro models and analysts’ expectations. But In contrast, some of the analysts are hopeful for the stability in the value of Iraqi Dinar in coming 12 months.

Factors Analysis

As I mentioned above that Foreign Exchange rate is fully tied up with the prevailing condition in the concerning country, However, there is a large number of Factors which effect the revaluation of Iraqi Dinar. By taking a detailed review of environment, some important factors are important to be discussed, which are;

· Political Instability:

One of the major factors which affect the value of Iraqi Dinar is the instability in the political situation and policies of the government. As we know that the economy of Iraq depends upon the monetary and fiscal policy of Iraq. With the frequent changes in government officials and their policies .The exchange rate of Iraqi Dinar to US Dollar has been affected negatively. Now, government authorities are taking few steps to fill this gap and to improve all policies. So that, we are expecting the revaluation of Iraqi Dinar along with the stable Political conditions. Recently, Election Commission of Iraq has approved nine more parties to participate in upcoming elections.

· Economic Conditions:

There are a lot of economic indicators which we can analyze for the purpose of observing the effect on the value of Iraqi Dinar. As per the current scenario, due to war, the GDP of Iraq has fall even from its bottom line. As well as the trade of the country has been also affected. International investors not ready to invest in this economy. Foreign Exchange rate depends upon the Demand and Supply of the currency as well as the purchasing power Parity which is directly related to the Inflation rates and the purchasing power of the people which has been also affected due to political instability and war issue. Now, Chairman of Central Bank of Iraq is trying to make a few decisions to increase in the value of Iraqi Dinar which can be possible in a few months.

· War and Security Issues

War is the worse situation faced by any country since the advent of this world. It affects all the areas of the country and destroys its whole infrastructure. Same situation is prevailing in Iraq now-a-days .Along with that the brutality of Daa’ish is also very problematic for Iraqi natives. But here is one more realty which we all have to admit that all the great countries have become successful after crisis and wars. So, we can expect that the war will be over soon and the value of Iraqi Dinar will rise again.

· Trade of Natural Resources

Iraq is having the gift of nature in shape of massive oil reserves. Even the most part of GDP is consisting oil trading. But due to war, this area has been neglected for many years. But now authorities are trying to increase the production of oil so that export will also become high and the Iraqi Dinar will be stable.

Bottom Line

Along with all these factors , there are a lot of other indicators which are effecting Iraqi Dinar revaluation but positive thing is that now all native forces are trying their best to recover the previous value of Iraqi Dinar and to rise its value up to an adequate limit.